Wall Street Journal
June 25, 2011
Had Ben Franklin been present at the Maastricht summit back in the 1990s, he might have told Europe's publics: "You've got a euro, if you can keep it."
The rather less quotable version this week from the European Central Bank is, "Please, God, don't let there be a 'credit event.'"
On one level, it seems absurd that the fate of Europe hangs on the decisions of Moody's and S&P. If Germany had prevailed in its demand that private creditors chip in for the latest Greek bailout, the rating agencies might have discerned a "credit event"—or default. Banks holding Greek debt might have been deemed in violation of their capital standards. Bank depositors might run. One country after another might be forced to close its banks and reopen them having dumped the euro in favor of restored local currencies.
That's the nightmare scenario. But step back. The larger message is that the euro, finally, is working.
Whether Greece gets debt relief now or later, the Greeks will not escape sweeping structural reform of their economy—one of the most corrupt, crony-ridden, patronage-ridden, inefficient, silly economies in Christendom. Its tax system operates on voluntarism and fine judgments about whether the bribe or the tax would be more burdensome to pay. The state railroad maintains a payroll four times larger than its ticket sales. When a military officer dies, his pension continues for his unwed daughter as long as she remains unwed. Various workers are allowed to retire with a full state pension at age 45.
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